On Aug 11, 2014, we issued an updated research report on
McGraw Hill Financial, Inc.
) following the company's second-quarter 2014 results.
The company's adjusted earnings of $1.06 per share from continuing
operations grew 15% as well as beat the Zacks Consensus Estimate of
98 cents. Total revenue increased 8% to $1,346 million and
surpassed the Zacks Consensus Estimate of $1,292 million owing to
strong performance at the company's segments.
After the impressive results, management upgraded the full-year
2014 earnings guidance. McGraw Hill Financial now expects adjusted
earnings in the range of $3.80-$3.90 per share, up from $3.75-$3.85
per share projected earlier.
In spite of an earnings beat, estimates for McGraw Hill Financial
have not shown any upward revision remaining constant at $3.87 and
$4.40 per share for 2014 and 2015 respectively. Analysts remain
concerned about the impending verdict on the Department of
Justice's (DoJ) $5 billion civil fraud case against S&P
Ratings. Moreover, anticipated weakness in structured finance and
difficult debt issuance environment adds to the woes.
S&P Ratings Services is accused of deliberately providing high
ratings to the U.S. collateralized debt obligations (CDOs) and
residential mortgage backed securities (RMBS) in 2007 that
underperformed and fueled the collapse of the housing market. The
U.S. Government stated that S&P did not properly highlight the
credit risks related to the mortgage securities issued by the
Though the company received a favorable court ruling on the case on
Apr 15, 2014 that should help in defense, the final outcome of the
case still remains uncertain. The company has submitted several
documents under the Wells Notice in Jul 2014. Though management
declined to make any further statements on the matter, it expects
legal expenses in the upcoming quarters to shoot up.
Currently, McGraw Financial carries a Zacks Rank #2 (Buy).
Headquartered in New York City, McGraw-Hill Financial is the
provider of financial information, competing with FactSet Research
Systems Inc. (
) and Moody's Corp. (
Key Picks from the Sector
Another stock in the same sector worth investment is The ADT
) which holds same rank as Mc-Graw Hill Financial.
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